BALTIMORE: Sinclair is making smart acquisitions, according
to Marcy Ryvicker of Wells Fargo.

“We like SBGI’s recent acquisitions of Freedom and Four Points stations for several
reasons,” she wrote. One is that Sinclair snagged the eight Freedom Communications
stations for $385 million, or a reasonable 6.6x blended EBITDA. Another is that
it gives Sinclair a duopoly in West Palm Beach, Fla., where the company scored CW
affiliate WTVX-TV from Four Points in September.

The Freedom transaction, announced today, includes eight stations in seven markets
reaching 2.6 percent of U.S. TV households:

Freedom’s secondary channels, including the CW affiliates in Kalamazoo, Lansing,
Medford and Beaumont, are also included.

The transaction is subject to Freedom's shareholder approval, which must be obtained
by Nov. 8, 2011, approval by the Federal Communications Commission and customary
antitrust clearance. Following receipt of antitrust approval--expected to occur
within 30 days--and prior to closing of the acquisition, Sinclair will operate the
stations pursuant to a Local Marketing Agreement. The companies anticipate closing
and funding of the acquisition to occur late in the first quarter and/or early in
the second quarter of 2012.

Upon closing, Sinclair expects to finance the $385 million purchase price, less
a $38.5 million deposit payable upon Freedom shareholder approval, either through
a bank loan or by accessing the capital markets.

“Not only will this transaction, when coupled with the Four Points transaction,
result in us owning two full-power stations in compliance with FCC regulations in
West Palm Beach, Freedom’s largest market, but it allows us to expand our middle
market position and network diversification,” said Sinclair chief David Smith. “We
believe our expertise and presence will enable us to improve the stations’ competitive
position and profitability. We look forward to welcoming the Freedom employees to
the Sinclair family.”

Together, Ryvicker estimates that the two transactions will add an average of $59
million a year in free cash flow to Sinclair’s balance sheet--$65 million in political
and $53 million in non-political years.

Sinclair (NASDAQ: SBGI) shares shot up from around $9 yesterday to more than $10
today after the acquisition announcement and its third-quarter earnings release.
Sinclair reported net broadcast revenues of $151.7 million for the quarter ending
Sept. 30, down 4.5 percent from the same period a year ago. Operating income was
$52.2 million versus $56.1 million. Net income attributable to the broadcast group
was $19.2 million, up 34 percent from a year ago. Diluted earnings per common share
were 24 cents versus 18 cents.

Political was $2.4 million in the third quarter compared to $9.8 million last year.
Local revenues, including retrans and times sales, increased 1.2 percent. National
dropped 19.2 percent. Excluding political, local was up 3.2 percent; national, down
8.9 percent.

Capitol expenditures for 3Q were $6.1 million. Debt on the balance sheet, net of
$61.4 million in cash, was $1.14 billion as of Sept. 30, versus net debt of $1.16
billion as of June 30, 2011.

For 4Q11, Sinclair expects revenues to come in between $178 million and $181 million,
down 4.7 to 6.3 percent due to it being a non-election year.

Capex in 4Q is expected to be $9.7 million and total $36.5 million for the year.

“We are pleased that advertising spending on our stations continues to grow despite
the volatility in the financial markets and economic concerns in the U.S. and abroad,”
said David Amy, Sinclair’s chief financial officer. “While there is an underlying
sense of caution by advertisers, this is more than offset by the growth in key advertising
categories such as automotive, our largest advertising category.

“The upcoming presidential election and the economic issues facing our country are
also driving increased political spending. For the year, we are estimating that
revenues from political issue and candidate spending will total approximately $7.7
million, which is a 10.8 percent increase over 2009 and a 54.7 percent increase
over 2007, the last two non-election year cycles.”
~ Deborah D. McAdams